Compensation; We work as one team. If your
performance target is not met, October Effect’s
performance based fee is not paid.
How do performance-based management agreements work?
The performance base fee has two components:
First, there is a quarterly management fee, in the case of our aggressive derivatives portfolio the quarterly management fee is 70 basis points (0.70%/4=.175% per quarter)
Second, there is a performance-based fee, in the case of our aggressive derivative portfolio, the annual performance fee calculated after year-end will be 20% of gains. To earn this performance fee, October Effect Ltd. must generate a return of 30% or greater. Should the target be reached, then the account will be assessed the performance fee equal to 20% of the account gain for the calendar year just completed. Said performance fees will be calculated in the first quarter of the new year. There will be a high watermark. Should the performance in any year be negative, the future performance fee will not include returning the account to the value before the negative year. See the performance fee agreement for details on the calculation.
Our second performance-based fee agreement is an aggressive income and growth portfolio. The annual fee on this portfolio will be 50 basis points (0.50%/4=.125% per quarter) assessed on a quarterly basis. The performance fee will be 5% of the gains when a targeted gain of 12% or more has been reached. Again, the high watermark criteria will apply.
Securities law, particularly the investment advisors act of 1940 sections 205 and 205-3, sets specific criteria to qualify a client to participate in a performance-based management account.
A qualified client must meet any one of the following criteria: